LEGAL & TAX ASPECT OF BUSINESS

LAW OF PLEDGE & BAILMENT

DEFINITION
A Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, be returned or otherwise disposed off according to the directions of the person delivering them

ESSENTIALS
Contract Delivery of goods and change of possession : mode of delivery For specific purpose Movable goods Return of specific goods

KINDS OF BAILMENTS
Pawn or pledge

Gratuitous bailment

Bailment for reward

RIGHTS OF BAILOR
Treat bailment as voidable : termination of bailment Return of goods

Claim compensation for wrongful use of goods by bailee

In case of mixture of goods by bailee To receive any increase or profit from goods bailed

DUTIES & LIABILITIES OF THE BAILOR

Put bailee into possession Disclose faults in goods bailed

Repay necessary expenses

To indemnify gratuitous bailee Responsibility for any loss due to defect in title To take back the goods

RIGHTS OF BAILEE
Particular lien (Sec. 170) To know faults in the goods bailed to him (Sec. 150) Claim proportionate share in goods mixed (Sec. 155) Claim expenses of bailment (Sec. 158)

CONTD
Claim losses for defect in title of bailor (Sec. 160) Gratuitous losses for defect in title of bailor (Sec. 159) Wrongful deprivation of goods Action against third person (Sec. 180 & 181) Enforcement of rights

DUTIES & LIABILITIES OF A BAILEE

To take reasonable care of the goods bailed (Sec. 151) Unauthorised use of goods bailed (Sec. 154) Return of goods (Sec. 160 & 161) To deliver any increase or profit accrued on the goods (Sec. 163) To pay damages Effect of mixture of bailors goods with the bailees (Sec. 155-157)

RIGHTS OF A PAWNEE
To retain the goods To recover extra-ordinary expenses

On Pawnors default
Liabilities of a Pawnee are similar to that of a bailee.

RIGHTS OF PAWNOR
Right of redemption Preservation and maintenance

To receive back the goods

PLEDGE
What is pledge? Bailor: pawnor ; pledgor

Bailee: pawnee; pledgee

Transaction: pawn Explain example.

ESSENTIALS
The goods must be delivered as security Actual or constructive delivery

Movable goods only

Transfer of possession is essential

PLEDGE BY PERSON OTHER THAN THE TRUE OWNER

Pledge by mercantile agent Pledge by a person in possession of goods

Pledge by a person with limited interest

Pledge by a co-owner in sole possession Pledge by seller/buyer in possession after sale

EXAMPLES

THE TRUSTEES OF THE PORT OF BOMBAY V. THE PREMIER AUTOMOBILES LTD. AIR 1971 BOM 317 (IMPLIED/INVOLUNTARY BAILMENT) Facts

Issue :- Whether the liability of the Board was that of a bailee?

Held in High Court :- negligence on part of Boards employee and Board is responsible for damage caused.

Held in Supreme Court :- The responsibility of the Board was clearly that of a bailee.
Law points :- A bailment may arise, even when the owner of the goods has not consented to the possession by the bailee at all It is sufficient if that possession is within the knowledge of the person concerned.

THE MORVI MERCANTILE BANK LTD. AND ANR. V. UNION OF INDIA 1965 AIR 1954
Facts :Issue :- Can an owner of goods make a valid pledge of them by transferring the railway receipt representing the said goods? What value such a document carry for this purpose? Held in High Court :- Allowed the appeal and decreed the claim for Rs. 20,000 on the ground that as pledgee of the goods.

Held in Supreme Court :- The endorsement of the railway receipt in favour of the Bank did not constitute a pledge of the goods covered by the receipt.

THANK YOU
Sumit Agrawal Yashashree Chaudhary Pradeep Dayani Pradeep Desmukh Shrushti Dubal Simi Gangeria Mayur Gidwani Pawan Golani Bhagyashree Gupta